October 28 is looming, and for many businesses that means the Business Activity Statement (BAS) is due. Of course, the big issue for many business owners is how to manage cash flow around this essential tax lodgment time.
Here are some ways you can plan ahead so you have enough cash on hand to meet your tax obligations.
Stay on top of your debts
Maintaining a steady cash flow can be challenging for businesses, but here are some of the things that can help:
- Simplify your accounting and automate where possible
- Specify a pay-by date on your invoices
- Follow up on outstanding customer payments ASAP
- Issue invoices promptly – as soon as you provide goods or services
- Offer discounts to customers who pay their invoice early
- Ask for deposits from customers ordering larger or more expensive items or services.
Sell unwanted assets and check inventory
If you need to liquidate assets to improve your cash flow, take a look around your business and the equipment you use. Is there anything that your business doesn’t really need?
If so, selling those unwanted assets can be a good way to improve your cash flow. You can also consider leasing your assets, which can help spread the cost long-term.
An inventory check can also be useful to identify and avoid buying more of the products that don’t sell as well as others.
Use a cash management account
A business cash management account can be a useful way of tracking all the money coming in and going out of your business. You can manage your cash transactions through the one portal and see your cash flow position at a glance whenever you like. It’s also a great way to build up your cash flow so you can make sure you have enough to fulfil tax obligations.
The benefits of using this type of account is that you can structure your finances around the one account, saving you time. Such accounts may also offer competitive interest rates, no account keeping fees, and unlimited fee transactions for things like BPAY®, batch payments, automatic transfers, direct credits and online banking transactions.
Save money into an interest bearing account
Does your business have any surplus cash? It can be a good idea to pop it into an interest bearing account, rather than just a basic account.
This type of account may come with rules, such as how much you need to deposit monthly in order to get the full interest benefit, and limitations such as a certain number of withdrawals you’re allowed to make in a certain timeframe.
Map out your cash flow
Doing a cash flow forecast or budget with your accountant or financial advisor is one of the best ways to help ensure you’ll have enough cash available to meet your tax obligations.
This is an important tool to help pinpoint payment cycles or seasonal trends that pop up for your business and help identify potential cash flow shortages so you can plan ahead to cover payments.
Using the most up-to-date data possible, ask your advisor to map out your cash flow forecast for the next 3, 6 and 9 months so you get the most accurate financial forecast.
And if it’s too overwhelming paying the BAS quarterly, consider changing your lodgment cycle. This can mean extra reporting, but it may make it easier to budget for the BAS payment when it rolls around.